Recurring Fair Value Measurements

8 Months Ended

Sep. 30, 2021

Note 8 — Recurring Fair Value Measurements

The Company’s FPA liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. At September 30, 2021, the FPA liability was determined to be $1,012,663 and is classified within Level 3 of the fair value hierarchy.

The Forward Purchase Agreements are accounted for as liabilities in accordance with ASC

815-40

and are presented within Forward Purchase Agreement liability on the Condensed Balance Sheet. The FPA liability is measured at fair value at inception of the instrument (August 23, 2021) and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.

Measurement

On September 30, 2021 and August 23, 2021, the Company used a Probability Weighted Expected Return (PWER) model to value the FPA liability.

The key inputs into the modified PWER model for the FPA liability were as follows:


Input	September 30, 2020			August 23, 2021
Probability of successful business combination	$	85	%	$	85	%
Likelihood by 3/31/2022		25	%	$	25	%
Likelihood by 3/31/2023		50	%		50	%
Likelihood by 3/31/2023		25	%		25	%
Risk-free rate		0.16	%		0.09	%
Stock price	$	10.00		$	10.00
Estimated term remaining (years)		1.37			1.10
Volatility		14.0	%		14.0	%

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the FPA liability classified as Level 3:


Fair value at August 23, 2021	$	1,013,935
Change in fair value		(1,272	)
Fair Value at September 30, 2021	$	1,012,663

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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